As the Russia-Ukraine conflict worsens and the prospect of another world war looming ever closer since the Cold War ended, let us look into how exactly we got into this dire situation. Duly starting from the Nordstream 2 debacle all the way to Russia’s potential invasion of Ukraine, and what the potential outcomes are for said conflict. And if you really read carefully enough, you might even gain some insight into why Bitcoin and other crypto currencies plummeted in early 2022.
Let us go back to where all recent escalation started, Nordstream 2, the Russian gas pipeline built under the Baltic Sea and the root of all European geopolitical evil. As of now, more than a third of the Continental Europe’s total gas imports are provided by Russian state-backed Gazprom via several pipelines: one through Belarus and Poland, another through Ukraine and the existing Nord Stream 1 pipeline. “Why so much talk about one extra gas pipeline”, you may wonder, “especially as it may allow us to finally close down the Groningen gas field?”. Well, there is one tiny itty-bitty problem, the pipeline is owned by none other than Kremlin’s gas conglomerate Gazprom, meaning that Gazprom can now reach customers in Germany and elsewhere in Europe without using pipelines running through Ukraine. In turn, Russia can potentially use this gas project to undermine Ukraine (depriving Kyiv of up to $2bn per annum), while also increasing its leverage over energy supplies.
When faced with Europe’s support for the Russian infrastructure project, the Trump administration levied heavy sanctions against companies involved in Nordstream 2’s construction. Seems like something Donald Trump would do, right? But I would not be too rash in discarding Trump’s policy. Put yourself in his position (for this thought experiment, you can disregard the eccentric personality of billionaire, world-wide famous Donald Trump). Say that your best pal Europe and their class bully, Russia, all want to play in the same playground. Let us call the playground Continental Dominion, a.k.a. Continental Security & Peace. Would you still stick by your mate Europe in deterring Russia from taking Europe’s spot at the playground if at the same time, Europe is the one inviting Russia to play (funding Kremlin through gas purchases)? I think not.
To portray Trump’s thought process more faithfully: pal Europe wants to play; big bully Russia also wants to play and threatens pal Europe. Geez, I help. I big so Russia back off. But Europe now wants to play with Russia. I betrayed feel. I do not like mate Europe anymore.
*The aforementioned paragraph was written to be read either in Peter Griffins’ or Yoda’s voice.*
After the heavy sanctions were upheld by the Biden Administration, to soothe their German-speaking buddies, a bilateral deal between Washington and Berlin was made. The deal, Merkel’s last political hurrah, meant that in exchange for the US withdrawing its sanctions, Berlin vowed to protect Ukraine and Europe from potential Russian threats. Seeking to assuage the Ukrainian concerns, the former German chancellor promised to deter Russia from “weaponizing” the gas corridor and to allocate a $1bn fund to accelerate Ukraine’s shift from coal to renewable energy. That is half of what Ukraine is losing ANNUALLY due to Nordstream 2, mind you. It’s like taking all the candy of a child on Halloween and letting them keep the wraps and reminding them to be grateful for what they got. You have to feel for the Ukrainian government, they have had so little to say in anything that has happened. And as if matters could not be worse, in September 2021, the car carrying Ukrainian president Zelensky’s top aide was sprayed by gunfire in broad daylight, just before the president was about to address the United Nations on matters such as raising tension in the East, corruption, etc. Does it remind you of anyone? For one, I remember Pablo Escobar doing something awfully similar. Maybe somebody should check whether the Pablo Escobar Netflix series is available in Russia, just saying.
Come December 2021, and all hell broke loose. Here is a headline from Financial Times: “European unease about Nord Stream 2 and Russia as an energy supplier have risen this autumn due to a gas crunch and soaring energy prices”. Look at that, pal Europe finally realized that they might have just gotten themselves in some deep, stinking pile of feces. Was it the grand Russian army sunbathing at the Ukrainian border that gave it away? The countless European governments’ websites being hacked? Or Putin pledging to meet rising gas demand and then Gazprom dropping gas supply by 90% due to “maintenance”? And yes, you guessed it, the only way Russia could increase its gas output to Europe and ease the crisis was if Germany approved the pipeline. Given the high energy prices, one dreams of a warm winter. See, climate change is not all bad? And if you are not appalled by my previous statement, then let me make another try: Corona might save us yet, or at least Europe-wide lockdowns. The International Energy Agency claimed in December that it expected a surge in Covid-19 cases to slow the recovery in oil consumption, with air travel and jet fuel being the hardest hit.
Despite the Nord Stream 2 pipeline being completed in September, approximately 6 years after Russia annexed Ukraine’s Crimea peninsula, EU regulators have yet to give their approval. Again, the decision rests with Berlin. Until the Bundesnetzagentur certifies Nord Stream 2 as an independent transmission operator, the gas will not flow. That means February 2021 at the earliest, June 2021 the latest. But for the Nordstream 2 pipeline to abide fully by European laws, Gazprom must not have a monopoly on pipeline gas exports from Russia. Thus, Gazprom must open its pipeline to other companies and prove that regulated tariffs are put into place. If you think that is good news, hold that thought. It is enough for Russia to find another company to share the pipeline with and all is well. And to add insult to injury, the Russian government has considered opening up pipeline gas exports to none other but Russia’s second-largest gas producer Rosneft. Oh, would you look at that! If there is one person happy about all this, except Putin, I imagine it is Trump, laughing his arse off at Europe and screaming “I told you so”.
Given the rising tensions, EU Commission’s Ursula von der Leyen vowed to expand existing punitive financial measures against Russia in the event of an invasion of Ukraine. But what exactly are these measures? Well, it is such a secret that nobody knows, really. Despite having been commissioned in June 20212022, the draft paper got stuck in internal wrangling between EU institutions. Thus, instead of having the set of potential sanctions ready to be deployed in December 20212022 when the Russian army was already amassing by the Ukrainian border, the EU was caught flat-footed once again. Luckily, pal US came to the rescue and started negotiations with their Russian counterparts.
On a more serious note, though, the alliance has once again shown some of its core weaknesses: bureaucracy, division, lack of military power. One should not believe that the EU is anywhere near playing a major role in world politics. Former ECB president and current Italian prime-minister, Mario Draghi, after drawing attention to some of the aforementioned limitations of the alliance, claimed that these economic sanctions would only be the possible means of “deterrence”, but Europe was not in a position to give up Russian gas supplies. By now, the US is seriously investigating means of providing gas to Europe in case of war in Ukraine.
Negotiation in Geneva
Just when we thought that the peak of this ongoing tension was reached during a call between J. Biden and V. Putin back at the end of 2021 and that matters could not get any worse, the summit between US and Russia took place last week in Geneva. But guess what, did our pal EU get a seat at the table? Nope. But neither did Ukraine nor Poland, nor any Baltic country for that matter. One might think that it concerns them at least as much as it does the US. Needless to say, the unsuccessful talks increased the likelihood of escalation.
To make things even funnier, the talks had not even ended when around a dozen of Ukraine’s governmental websites were hacked and personal information was leaked en masse. Coincidence? I guess we are yet to find out, but some may argue that it was the first step Russia took to show off their might. So, neither do they get a say in a conflict which might well result in their country being invaded, but they are also the apparent victims of the disastrous diplomatic talks of US and Russia. One might think of them as just pawns on a chessboard.
Coming into those negotiations, West’s agenda was clear: a de-escalation of tensions in Eastern Europe and re-deployment of the 100k-175k Russian soldiers enjoying the Ukrainian border retreat. But for Russia, this is no longer just about Ukraine. Ultimately, Russia demanded a veto right on further expansion of the alliance, a removal of all US nuclear weapons in Europe, as well as a military withdrawal from the territories of the former Warsaw Pact and Soviet Union.
At the same time, Russia demands NATO to stop the plan to spread to the East, and NATO’s flat refusal to even consider it, from Moscow’s point of view, emphasizes the West’s “double standards”. As a result, Russia's chief negotiator hinted that Moscow could deploy forces and nuclear weaponry in Cuba, Venezuela and Belarus. The United States treated such a statement as a threat and stressed that it would react decisively if Moscow implemented these threats. And the fact that neither of the main political powers do not want to look anything close to weak on an international and national level, just makes these negotiations even more tense. "The lack of a diplomatic solution logically leads to a further escalation of the crisis," wrote Dmitry Trenin, head of the Carnegie Center in Moscow.
World War 3?
In case of open conflict, despite Ukraine’s 250k army being relatively well trained and battle hardened, it is no match to Russia’s. On a more reassuring note, the Biden administration firmly committed itself to the security of Europe and sovereignty of Ukraine. However, the question remains: how far is the US willing to stick out its neck in case of a Russian invasion? The tumultuous withdrawal from Afghanistan has damaged US military standing in the world and questioned alliance cohesion. The US, while laser-focused on China, are crippled by political polarisation and painfully aware of their limited influence over an electorate weary of war and distrustful of politics. “Restraint” seems to find soaring bipartisan favour. Therefore, despite Biden’s outright commitment, it is unlikely that the US would intervene militarily.
While the US and Ukraine and most other Baltic countries warn of imminent war, it seems like the greater the distance to the Russian border, the less one feels affected by the threat. Mario Draghi, Italy’s prime minister, has expressed scepticism about a possible Russian invasion. Similarly, despite the Ukrainian and Russian currencies and debt prices taking a toll, the markets seem generally unfazed by the likelihood of war. In case of war, with a clear emphasis on energy markets, the prices would be heavily affected via inflationary pressure. Thus, the already high energy prices would soar even further were Russia to invade and stop providing gas to Europe.
As before, the key to Europe’s response may lie with Germany. NATO and EU warned of “massive consequences and severe costs” if Russia were to invade and there are indeed several they could deploy, i.e., sanctions on Russian entities, cutting Russia out of the Swift electronic payment system, cancelling the Nord Stream 2 pipeline. But all the aforementioned measures require Germany’s involvement and are financially and politically costly for Germany’s new government.
Ultimately, while we cannot foresee what the outcome of said conflict will turn out to be, we can form a decent view on the matter by looking at how Russia has dealt with political tensions in the not-so-distant past.
Hybrid migration crisis
Another paramount political event that threatened the security of the north-eastern European region was last autumn’s migration crisis. Thousands and thousands of people from Iraq, Afghanistan and Syria amongst others, were (allegedly) somehow talked into flying to Belarus for a promise of a better, safe life and then entering the European Union via neighbouring countries, i.e., Poland, Lithuania and Latvia. Poland’s response to the fleeing migrants infuriated human-rights activists and life-long critics from EU parliament altogether. Nonetheless, many made it past the border, with Belarusian soldiers cutting through the border fencing at night time to allow them to cross or guiding them through the forests. On the other hand, the ease with which said people reached the Polish border and the aforementioned implication of Belarus’ soldiers in a clear violation of an EU member state’s sovereignty, has had many people worried.
Now, picture Harry Potter’s Professor McGonagall saying "Why is it when something happens, it is always you three?" Despite not making one reference to Russia in this paragraph (Russian meddling has not yet been proven), but after everything you’ve read so far, don’t you feel like this is an event that Putin would be proud of?
Kazakhstan crisis
At the onset of 2022, a state of emergency was declared in Kazakhstan after anger at rising fuel prices escalated into protests in several Kazakh cities. What started as tense protests snowballed into the biggest protests in Kazakhstan’s post-Soviet history. In the wake of said violence which led to dozens of deaths on both sides, Kazakhstan’s president blamed everything on abroad-trained, armed bands of terrorists. He then went on to vow to act with force to curb protest and appealed to CSTO, a Russian-led military alliance, for aid.
In the words of fictional sociopath, Botticelli-admirer and cannibal serial killer Hannibal Lecter: “When the Fox hears the Rabbit scream he comes a-runnin', but not to help.” If at first, the CSTO forces, pseudo-peacekeepers, were supposed to stay for a “limited time” till the situation stabilizes, now it is seems like the CSTO forces will remain put “for as long as Kazakhstan’s president needs them” (Leonid Kalashnikov, chair of CIS affairs in the Russian Duma).
On a more serious note, though, a similar popular revolt occurred in Belarus, where opposition leaders came close to toppling the regime of Alexander Lukashenko after Europe’s last dictator allegedly rigged national elections. One thing is for sure, the pressure is rising for the Eastern autocrats. Despite Putin’s sabre-rattling, with Russia’s economy in the doldrums and mounting political pressure, it may well be that his Ukrainian ruse could be the outcome of his weakness, not strength. But rest assured, World War 3 is unlikely to start just yet.